After a lot of trying things, here's what I stand.
I went ahead and installed the kernal-3.4.11. Booted and seemed stable. No direct rendering. I installed the latest Nvidia driver (310.19). Upon reboot, almost immediately froze desktop. Did the Sysreq to get keyboard back and kill processes, and pressed <alt><F2>. After about 20 seconds, I was at a login prompt. Went back to F8 and it was in text mode, still frozen. Rebooted with the same results.
Tried to roll back to Nvidia 3.04.64 drivers and things took a turn for the worst. Booted to a black screen the first time. Second time, bootup process looked completely different, but was able to logiin. Grepped Xorg.0.log and saw that the nvidia driver 3.04.64 was installed, but the client was using ATI drivers.
glxinfo showed the following;
name of display: :0
X Error of failed request: BadRequest (invalid request code or no such operation)
Major opcode of failed request: 135 (GLX)
Minor opcode of failed request: 19 (X_GLXQueryServerString)
Serial number of failed request: 12
Current serial number in output stream: 12
Graphics was very jerky. Moving a window around on the screen was funny, as parts of it would move before all of it moved.
Decided maybe it was time to reinstall PCL. Downloaded latest ISO. Booted DVD. Opened a terminal and typed glxinfo and everything looked great. tried glxgears, which ran great. Tried to stop glxgears...system froze. after pressing <alt><ctl><F2> a couple of time, it first went to a terminal, then back to the logon screen. Was able to duplicate that behavior, but not always.
So, if the latest and greatest PCL (it was using the nvidia 3.04.64 drivers) was having troubles with my hardware, I don't know whether or not to do a reinstall. Doing a reinstall will at least get me to a known good state from which to work from.
I feel that the system is becoming unstable and unusable unless there's some magic formula to remove things and reinstall packages to try to get this back to a clean slate and working properly.
p.s. Does this look ok? Curious about the 2 fglrx modules and why the 8.9 is marked as installed and not the 9.012.
fglrx, 9.012, 3.2.18-pclos2.pae, i586: built
fglrx, 8.982-1pclos2012, 3.2.18-pclos2.pae, i586: installed
nvidia304, 304.64-1pclos2013, 3.4.11-pclos1.bfs, i586: installed